Green Mountain Coffee Roasters CAGNY 2015
-
Upload
neil-kimberley -
Category
Business
-
view
369 -
download
0
Transcript of Green Mountain Coffee Roasters CAGNY 2015
CAGNY CONFERENCE – FEBRUARY 19, 2015
1
Brian Kelley, Chief Executive Officer
FORWARD LOOKING STATEMENT
2
Certain information herein constitutes "forward-looking statements." Forward-looking statements can be identified by the fact that they do not relate strictly to historical or current facts. They often include words such as "believes," "expects," "anticipates," "estimates," "intends," "plans," "seeks" or words of similar meaning, or future or conditional verbs, such as "will," "should," "could," "may," "aims," "intends," or "projects." However, the absence of these words or similar expressions does not mean that a statement is not forward-looking. These statements may relate to: the expected impact of raw material costs and our pricing actions on our results of operations and gross margins, expected trends in net sales and earnings performance and other financial measures, the expected productivity and working capital improvements, the success of introducing and producing new product offerings, the impact of foreign exchange fluctuations, the adequacy of internally generated funds and existing sources of liquidity, such as the availability of bank financing, the expected results of operations of businesses acquired by us, our ability to issue debt or additional equity securities, our expectations regarding purchasing shares of our common stock under the existing authorizations, projections of payment of dividends, the impact of pending shareholder litigation, and the impact of antitrust litigation pending against the Company in the United States and Canada. A forward-looking statement is neither a prediction nor a guarantee of future events or circumstances, and those future events or circumstances may not occur. Management believes that these forward-looking statements are reasonable as and when made. However, caution should be taken not to place undue reliance on any such forward-looking statements because such statements speak only as of the date when made. We expressly disclaim any obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. In addition, forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from our Company's historical experience and our present expectations or projections. These risks and uncertainties include, but are not limited to, those described in Part I, "Item 1A. Risk Factors" and Part II, "Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations" in our Form 10-K filed with the Securities and Exchange Commission for the fiscal year ended September 27, 2014, and elsewhere in that report and those described from time to time in our future reports filed with the Securities and Exchange Commission.
GAAP TO NON-GAAP RECONCILIATION
3
In addition to reporting financial results in accordance with generally accepted accounting principles (GAAP), the Company provides non-GAAP operating results that exclude legal and accounting expenses related to the SEC inquiry, and pending securities and stockholder derivative class action litigation; and non-cash acquisition-related items such as amortization of identifiable intangibles, each of which include adjustments to show the tax impact of excluding these items. In each case these amounts are not in accordance with, or an alternative to, GAAP. The Company's management believes that these measures provide investors with transparency by helping illustrate the underlying financial and business trends relating to the Company's results of operations and financial condition and comparability between current and prior periods. Management uses the measures to establish and monitor budgets and operational goals and to evaluate the performance of the Company. Please see the "GAAP to Non-GAAP Reconciliation" table that accompanies this document for a full reconciliation of the Company's GAAP to non-GAAP results.
AGENDA
4
Power of premiumization
Overview
Power of innovation
Keurig® hot system opportunity
Keurig® cold system launch update
AGENDA
5
Power of premiumization
Overview
Power of innovation
Keurig® hot system opportunity
Keurig® cold system launch update
6 *Non-GAAP EPS is a Non-GAAP financial measure. Please see the attached “GAAP to Non-GAAP
Reconciliation” to find a reconciliation of this measure.
*
7
A UNIFIED DIRECTION
8
PURPOSE:
MISSION:
VISION:
9
A network system effect
A brand accelerator
A premium experience brought into the home
An enabler to understand the demand signal in home
An in-home beverage creation system
KEURIG® IS AN ADVANCED, PERSONAL BEVERAGE SYSTEM
THE NETWORK EFFECT
10
= Keurig Households
Both brands and households representative only. Not actual numbers
WE SELF-GENERATE & BENEFIT FROM IT
WE SELF-GENERATE & BENEFIT FROM IT
THE NETWORK EFFECT
Source: 2014 Omnibus Survey. * Estimated.
= Keurig Households Both brands and households representative only. Not actual numbers
11
BROAD KEURIG BREWED® FAMILY OF BRANDS
12
FY 2015 OUTLOOK
13
Tax rate 34-35%
Non-GAAP EPS growth mid-single digits
Capital investment $425M to $475M
Negative impact of fx on EPS ($0.15)
Dilutive impact of 2014 Coca-Cola & Lavazza equity transactions
($0.27)
Free cash flow
Revenue growth mid-single to high-single digits
$225M to $325M
Per Keurig guidance given on 2/4/15
LONG-TERM OUTLOOK
14
Per Keurig guidance given on 2/4/15
Non-GAAP EPS growth mid-teens
Revenue growth double digit
Gross margins + 40%
Operating margins + 20%
DISCIPLINED CAPITAL DEPLOYMENT
15
Reinvest in the business to drive top tier growth
Small tuck-in M&A for specific technologies, market distribution and/or brands with disciplined capital deployment
Return cash to shareholders in form of dividends and share repurchases
FY2012 FY2013 FY2014 FY2015 YTD
Share Repurchase
Dividends
$76M
$188M
$1.2B
$340M
INCREASING CASH RETURN TO SHAREHOLDERS
16
• Raised quarterly dividend 15% in FY15 from FY14
• Current annual dividend of $1.15 per share, yield of ~1%
• Returned ~$1.2 billion to shareholders in FY2014
• Returned $340 million to shareholders YTD in FY2015
Note: FY2015 YTD is as of 02/13/2015
CORE TRENDS THAT WILL DRIVE BEVERAGE SYSTEMS
17
FRESHNESS PERSONALIZED
SIMPLE
WELLNESS
SUSTAINABLE
CHOICE/VARIETY
DEMOCRATIZED NATURAL
LOOKING AHEAD
• Bringing premium experiences into the home through innovative technology
• Single serve capsules/pods will experience growth globally across beverages
• Innovation in technology systems will be driven by personalization & brand choice, fresh, sustainable, simple, 5 sense experiential
• In-home beverage systems will create new opportunities for brand creation, trial and growth
• In-home consumption data will change how we market to consumers
• Online and mobile will be advantaged due to 1:1 relationships
• The home will become an exciting beverage experience center
A global revolution in the beverage industry
18
Successfully introduce Keurig® KOLD™ to North American consumers
Continue to invest in our strong innovation pipeline
Improve growth trajectory in our Keurig® hot system
Begin to set framework for the globalization of the Keurig® system
19
OUR PRIORITIES
AGENDA
20
Power of premiumization
Overview
Power of innovation
Keurig® hot system opportunity
Keurig® cold system launch update
21
KEURIG® SYSTEM BREWED COFFEE GROWTH
20.4%
6.1% 5.3% 4.5% 4.3% 3.2% 2.7% 1.5%
-0.5% -0.6% -2.0% -3.0%
KeurigSystemBrewedCoffee
EnergyDrinks
BottledWater
Coffee Milk CannedJuice
Non FruitDrinks
SportsDrinks
BottledJuices
CSD AsepticJuices
DrinkMixes
Total U.S. Multi Outlet Dollar % Change vs Year Ago
Leading the beverage category
22
Source: IRI Market Advantage Total U.S. Multi Outlet 52wks ending 12/28/14
SINGLE CUP COFFEE IS PROPELLING COFFEE CATEGORY $ GROWTH While all other segments soften
23
4.5%
25.8%
-2.9% -4.3% -9.5%
Total Coffee Single Cup Coffee Instant Coffee Ground Coffee Whole Bean Coffee
Total U.S. Multi Outlet $ Pct Chg vs YAG
Source: IRI Market Advantage Total U.S. Multi Outlet 52wks ending 12/28/14
$7,062 $7,937 $8,357 $8,731
12%
22%
30%
36%
0%
10%
20%
30%
40%
$-
$2,000
$4,000
$6,000
$8,000
$10,000
2011 2012 2013 2014
Total U.S. Multi Outlet Coffee Dollar Sales (Billions)
Total U.S. Multi Outlet Coffee Dollar Sales (Billions)
Single Cup Coffee Share of Total Coffee
SINGLE CUP SHARE OF COFFEE
24
Source: IRI Market Advantage Total U.S. Multi Outlet 52wks ending 12/28/14
BRANDS ARE BUILT DIFFERENTLY IN THE KEURIG® SYSTEM
25
BRANDS ARE BUILT DIFFERENTLY IN HOT Top 5 coffee brands category $ share
26
Roast & Ground Coffee Category Keurig System Brewed
A wider variety of brands are built and can grow
64% Top 5
Brands ~28% Same Top 5 Brands
Source: IRI Total US-MULO, latest 52 weeks ending 12.28.14
®
BRANDS WILL BE BUILT DIFFERENTLY IN COLD Top 5 cold brands category $ share
27 Source: IRI Total US-MULO, latest 52 weeks ending 12.28.14
How will brands evolve in the Keurig® cold system in the future?
CarbonatedBeverages
Sparkling Water RTD Tea Sports Drinks
AGENDA
28
Power of premiumization
Overview
Power of innovation
Keurig® hot system opportunity
Keurig® cold system launch update
29
THE KEURIG® BRAND IS POWERFUL
30
Supplier of the Year4
• 80% Brand Awareness1
• #1 Coffee maker in category dollar sales for 53 months running2
• Brand of the Year Single Serve Coffee Maker3
1 Sentient Brand Tracking Study. January 2015 2 NPD All Channels 3 2014 Harris Poll EquiTrend® Rankings 2014 4 for 2014 in association with Keurig 2.0 system launch
31
25.2%
6.7% 5.4% 5.3% 4.6% 3.8%
2.6% 2.5% 2.2% 1.5%
Keurig Keurig Keurig Keurig Keurig Keurig Keurig Hamilton Beach Keurig Black & Decker
% of Total Coffee/Espresso Maker by Item in Dollars Share – Q1 FY’15
Source: NPD All Channels Note: Total Coffeemaker category includes all coffeemakers and espresso makers. NPD data does not include all retailers, and is estimated to represent 60-70% of the total market
8 OF THE TOP 10 BREWERS SOLD BY DOLLAR SHARE WERE KEURIG® BREWERS IN THE HOLIDAY
DISRUPTIVE INNOVATION ADOPTION CYCLE
Early Majority Late Majority
Early Adopters
Innovators Laggards
Early Market
2.5% 13.5% 34% 34% 16%
Keurig’s hot system is still in the early stages of development
32
HOW WE’LL CONTINUE TO WIN
33
New Technologies Expanded Choice Creative Design
NEW TECHNOLOGIES: INTRODUCING KEURIG® 2.0 K200
34
35
KEURIG® 2.0 K200 POSITIONING
For users that desire a smaller footprint
Lowest introductory price point for 2.0
Expanded color options
PORTFOLIO STRATEGY TO REACH OUR TARGET Brewer innovation at every price point
36
EXPANDED CHOICE: SIZE VARIETY
37
• Launching K-Mug™ pack line on Keurig.com in mid-March
• Launches with 5 varieties and expands to 9 in Fall ‘15
• Expanding K-Carafe™ pack line with 9 additional varieties
• 23 total K-Carafe pack varieties will be available
• In Fall ’15 K-Carafe will expand to partner brands
EXPANDED CHOICE: BEVERAGE VARIETY
38
NEW LOOK ACROSS GREEN MOUNTAIN COFFEE BRAND
39
AND ACROSS THE KEURIG® SYSTEM BRANDS
40
CREATIVE DESIGN: NEW MERCHANDISING
41
WE CAN LEAD RETAILERS IN DESIGNING A BETTER AISLE
42
43
$5.99 for 36 months
$7.99 for 36 months
$16.99 for 36 months
EXPLORER ADVENTURER PIONEER
AGENDA
44
Power of premiumization
Overview
Power of innovation
Keurig® hot system opportunity
Keurig® cold system launch update
45
46 CONFIDENTIAL: FOR INTERNAL USE ONLY
APPLIANCE, BEVERAGE, POD AND PROCESS EQUIPMENT
VERTICAL-HORIZONTAL SYSTEM INTEGRATION Balanced and linked technology capabilities across the Keurig system
Concepts & Interactions
Design
Development
Assembly Fabrication
Quality Assurance
Appliance Beverage Pod Process
Equipment
47
KEURIG GREEN MOUNTAIN BEVERAGE R&D
Our Beverage Innovation Center • Start-up in 2013 • Part of our Vermont infrastructure • Complements our Boston campus
State-of-the-Art Beverage Science Capabilities • Product development & culinary labs • Sensory testing facility • Hot & cold process pilot plants • Analytical & microbiology labs • Package design & distribution testing • Siemens product lifecycle management system
Home of our coffee heritage and birthplace of our Keurig cold technology
48
Deep in the Green Mountains near Stowe, Vermont
BEVERAGE R&D SENIOR LEADERSHIP Combined 350+ years of beverage and CPG experience, incl. from the following companies
49
OUR BEVERAGE INNOVATION TEAM
125 Scientists, Engineers and Technicians Areas of Expertise
• Coffee, Culinary & Food Science • Beverage Formulation & Processing • Chemical & Mechanical Engineering • Packaging Science • Chemistry & Material Science • Sensory & Nutrition Science • Microbiology & Analytical Chemistry
Culture of innovation = talent x environment x process
50
Practicing Innovation Through Collaboration
OUR MANDATE FOR WINNING BEVERAGES
51
FRESHNESS PERSONALIZED
SIMPLE
WELLNESS
SUSTAINABLE
CHOICE/VARIETY
DEMOCRATIZED NATURAL
OPENING WORLDS OF BEVERAGES
52
Fresh-made, endless variety, new qualities and just-for-you
COLD HOT
AGENDA
53
Power of premiumization
Overview
Power of innovation
Keurig® hot system opportunity
Keurig® cold system launch update
How Can The Cold Beverage Category Be Revolutionized…
54
55
COLD BEVERAGES ARE 5X THE SIZE OF HOT BEVERAGES Dollar share by major category in the U.S.
56
Coffee 83%
Tea Bags 13%
Hot Cocoa 4%
Carbonated Beverages
36%
Bottled Water 17%
Shelf-Stable Juice 15%
Rfg Bev 13%
Sports & Energy Drinks
11%
RTD Tea/Coffee
4%
All Other 4%
Total Cold Beverage Sales* CY 2014: $50 billion +
Total Hot Beverage Sales CY 2014: $10 billion+
*excluding dairy Source: IRI U.S. Multi Outlet 52wks ending 12/28/14
COLD PROBLEMS HIDDEN IN PLAIN SIGHT
TEMPERATURE
FRESHNESS FORM FACTOR
INFLUENCES TASTE
CHOICE
SHOPPABILITY CARBONATION
LEVELS
IN HOME STORAGE
57
58
Carbonation with no CO2 canister
Perfect dosing & one touch simplicity
Beverage delivered cold
Vast brand selection
Sustainable
Freshly prepared carbonated, sparkling, and still beverages
Launching Fall 2015
59
WILL OFFER BROAD COLD BEVERAGE PORTFOLIO Beloved partner brands – plus new Keurig-owned brands
60
INTRODUCING OUR NEW OWNED BRANDS
61
Successfully introduce Keurig® KOLD™ to North American consumers
Continue to invest in our strong innovation pipeline
Improve growth trajectory in our Keurig® hot system
Begin to set framework for the globalization of the Keurig® system
62
OUR PRIORITIES
GAAP TO NON-GAAP RECONCILIATION
63
Fiscal 2014
Diluted earnings per share $ 3.74
After tax:
Expenses related to SEC inquiry (1) 0.01
Amortization of identifiable intangibles (2) 0.18
Non-GAAP earnings per share $ 3.93
(1) Represents legal and accounting expenses related to the SEC inquiry and pending securities and stockholder derivative class action litigation classified as general and administrative expense. (2) Represents the amortization of intangibles related to the Company's acquisitions classified as general and administrative expense
THANK YOU
64